MGMT3101 Tata Group Case Study

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Transcript of MGMT3101 Tata Group Case Study

Tata GroupTata GroupCreating A Corporate AdvantageAgendaOverview of Tata Group's Business StructureAnalysis of Current Corporate Parenting ApproachRecommendations100+ operating companiesbusiness sectorscommunications & ITengineeringmaterialsservicesenergyconsumer productschemicalsoperate in 100+ countries, 6 continentsemploy 540, 000 people worldwideBusiness StructureBusiness GroupHolding Company/CompaniesCompany 1Board of DirectorsBoard of DirectorsBoard of DirectorsCompany 2Company 3Tata's Business StructureControlling StakeControlling StakeControlling StakeTata Trusts66% shareholdingOthers34% shareholdingTata Sons LimitedTata IndustriesTata Strategic Management Group(TSMG)Tata InteractiveTata ServicesTata Quality Management Services(TQMS)Group Strategic SourcingTata Financial Services50% shareholdingWhat Approach Should Tata Group Pursue1. Long Term Sustainable Approach(value adding)2. Short Term OpportunitiesORTata Group Value Adding Approachlong term sustainabilitydo you want high investments?under the leadership of Ratan TataCorporate Parentingunified look to the future (Tata brand)defining vision and future strategiesflexibleValue Adding Approach2 main decision bodiesdeveloping a common identityBEBP agreementGroup Executive Office (GEO)Group Corporate Centre (GCC)Brand Equity Business Promotion (BEBP1. signatories use logo and name2. known as Tata Enterprise3. joint venturesValue Adding Approachconsisted of Tata Business Excellence Model (TBEM) and Tata Code of ConductTBEMshow scalable improvement and increasing performance standardsAnalysisAnalysisCentralised Servicescentralised servicesoperated on a no profit, no less basisfunded through BEBPsignificant advantages across the Groupavailable to all Tata companiesno mandate to use servicesTata ServicesCentralised ServicesProvision of Financial Servicesdecision making related to capital raising and structure - linked to the CentreTata Sons involved in all financial decisionsGroup companies able to leverage financial strength of the Group with help of financial SonsOne can count on financial support from the other Group companies...Benefits of Value Adding Approachnetwork of firmsmembers benefit from:resourcesstatusflexibilityaccessreduced uncertaintiesdiversificationknowledgecostsRallis received fundingTata brand reputationfreedom to choose servicesservices - legal, HRTata SonslearningNegatives of Corporate Parentingpotential lock-inleakage of informationorganisation/coordinationloss of short-term opportunitiesloss of autonomyadhering to a standardpressureall financial decisions have to be approved by Tata Sonse.g. Tata Chemicalsbrand imageTata-nessway of lifedistinct culturecritical gluecommon identitybalance between small companies and Big FishAre There Other Alternate Methods?Project Prunedownside to the Tata-nesssome cost saving oppotunities presenteconomies of scale and scope opportunitiesaim of creating commercial value for group companiesshort-term opportunitiesdiscretionary - firms didn't pursue this methodRecommendationsMacro RecommendationsGroup Selection Committee:Conglomerate Diversificationcontinue with a diversified portfolio of companies, which helps to mitigate risk and improve profit across the Groupoccurs when there is no common relationship or relatedness between companies, such as with Tata GroupGroup Selection Committee:Prevent Sales Cannibalismincrease control over existing Tata companies that are competing in the same industryscreen potential new companies to ensure there is no industry overlap with existing Group companiesMacro RecommendationsMacro RecommendationsGroup Selection Committee:Vertical Integration & Synergiesensure that the portfolio offers competitive inter-company synergiesi.e. vertical chain integrationthe idea of Keiretsu (an informal business group) could be utilised in pursuing great integrationMicro RecommendationsGroup Selection Committee:Conglomerate Diversificationshort term losses hurt smaller companies the mostTata culture (Tata-ness) has been described as a good support network between companiesBEBP agreement = wealth distribution systemhelped to support smaller Group companiesRecommendationsMicro RecommendationsTETB Surveillancesurveillance of individual companies to ensure cooperation with TETB and proper maintenance of the Tata brandRecommendation CriticismsConglomerate DiversificationSmall Company Support and Developmentnot immune to large systematic shockesi.e. financial crisesease of access to financial support can promote risk taking by individual companiesRecommendation Endorsementcontinue with existing long-term value adding approachalso introduce proposed Group Selection Committee to facilitate:Conglomerate DiversificationPrevent Sales CannibalismVertical Integration & SynergiesQuestions